RMB has a dedicated programme team working on reference rate reform impacts both within the bank as well as the potential impact on agreements with clients and products offered.

In 2017 the Financial Conduct Authority (FCA) announced they would no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021, propelling a shift away from the use of Interbank Offered Rates (IBORs) globally. Publication of the London Interbank Offered Rate (LIBOR) across various maturity tenors for GBP, EUR, CHF and JPY and USD LIBOR (1 week and 2 month) have ceased as of December 31 2021

Frequently used and referenced USD LIBOR maturity tenors (Overnight, 1, 3, 6 and 12 month) are most likely to cease after June 2023.

LIBOR may continue to be published voluntarily by panel banks that have a large inventory of LIBOR linked exposure that might roll-off in the three to five years after 2021, but national supervisory authorities are increasingly stressing that the risks associated with the LIBOR cessation need to be addressed by impacted organisations. Any extension requires a formal agreement from panel banks to continue to submit towards LIBOR’s determination. Given the push to transition to ARRs, it remains unlikely that the FCA will seek such an agreement.

The impact of COVID-19

On 25 March 2020, the FCA, Bank of England (BoE) and Working Group on Sterling Risk-Free Rates released a brief statement on the impact of COVID-19 on firms’ LIBOR transition plans, reiterating that “The central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed and should remain the target date for all firms to meet”. Further guidance may be issued to the market but no timelines have changed since the statement in 2020.

RMB has solid governance structures set up to drive change and workstreams across the business. We will continue these efforts to ensure that we are in line with our peers across the globe and continue to work towards acting in the best interests of our clients. In line with other financial services organisations, we continue to reduce LIBOR exposures by issuing new non-LIBOR linked products, encouraging refinancing options and remediating existing deals in good time.

Market participants have begun to adopt ARRs, including, but not limited to those outlined in the table:

Country Rate Administrator
United States Secured Overnight Financing Rate (SOFR) Federal Reserve Bank of New York
United Kingdom Reformed Sterling Overnight Index Average (SONIA) Bank of England
European Union Euro Short-Term Rate (€STR) European Central Bank
Switzerland Swiss Average Rate Overnight (SARON) Swiss National Bank
Japan Tokyo Overnight Average rate
(TONA)		 Bank of Japan

South African scenario

In South Africa, the South African Reserve Bank (SARB) has made significant strides in its effort to reform existing interest rate benchmarks:

  • In 2018 SARB issued a Consultation paper on selected interest rates in South Africa. The paper proposes several reforms to key interest rate benchmarks, as well as a host a of new benchmarks that could be used as ARRs
  • In May 2019 SARB established the Market Practitioners Group (MPG) to facilitate decisions on benchmark choices and operationalisation
  • SARB published a report on stakeholder feedback – highlighting the financial services’ preferences for the proposed alternative reform rate, as well as SARB’s recommendations

More about LIBOR

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